Boeing's Stock Is Crushing the Market in 2025. Can It Continue?

Boeing's stock has risen 13.6% this year, outperforming the S&P 500, driven by improved operational execution under CEO Kelly Ortberg. The company is on track to meet its 2025 objectives, including ramping up 737 MAX production to 38 aircraft per month, improving margins at Boeing Defense, Space & Security (BDS), and keeping the 777X on schedule for a 2026 delivery; however, long-term investors are still evaluating Boeing's ability to generate sufficient earnings for future development and shareholder returns.

Analysis

Boeing's stock (NYSE: BA) has demonstrated significant outperformance year-to-date, rising 13.6% compared to a minimal gain for the S&P 500, a rally largely attributed to improved operational execution under CEO Kelly Ortberg, appointed in August of the prior year. The company is reportedly on track with its key 2025 objectives, which include increasing 737 MAX production to an initial rate of 38 aircraft per month, enhancing profit margins within its Boeing Defense, Space & Security (BDS) division, and maintaining the 777X program's timeline for a first delivery in 2026. Specifically, CFO Brian West confirmed FAA approval for expanded 777X flight testing and reiterated the 2026 delivery target, supported by customer Emirates expecting its first 777X by end-2026. The 737 MAX production is anticipated to reach 38 units per month in the coming months, with plans for subsequent increases to 42 per month and then in five-unit increments, contingent on FAA approval post-demonstration of quality. Within BDS, which accounts for 60% of its business, core defense programs maintain mid-to-high-single-digit profit margins, while fighter and satellite programs (25% of BDS) show favorable margin trends. Crucially, the problematic 15% of BDS revenue tied to fixed-price contracts has achieved 'estimated-at-completion (EAC) stability,' with progress on the T-7 trainer and the MQ-25 drone moving to testing in 2026. While the near-to-medium term outlook appears positive contingent on continued execution, longer-term questions persist regarding Boeing's capacity to generate sufficient earnings and cash flow for new aircraft development, debt reduction, and shareholder returns.

Key Decisions for Investors

• Investors should closely monitor Boeing's ability to consistently meet its 737 MAX production rate targets, particularly the 38-per-month milestone and subsequent FAA approvals for increased output, as this is a key driver of the current positive narrative.
• Attention should be paid to the Boeing Defense, Space & Security (BDS) division's margin improvements, especially the progress in stabilizing and enhancing profitability in its fixed-price contracts, as this has been a significant drag on earnings.
• While near-term operational improvements are encouraging, investors should weigh these against the substantial long-term capital requirements for developing next-generation aircraft, managing debt, and sustaining shareholder returns before making long-term allocation decisions.
• Consider the current stock valuation in the context of the ongoing 'self-help' story and operational turnaround, recognizing that continued execution on stated objectives is critical for sustaining investor confidence and stock performance.